R&D tax credit deadline: How far back can you claim R&D tax credits?

Research and Development (R&D) tax credits are a UK government tax relief set up to reward businesses that invest in innovation.

If you’re new to the scheme, you might be concerned that you’ve missed your opportunity to claim on recent R&D projects.

Fortunately, you can claim retrospectively. But there is a deadline.

What’s the deadline for submitting retrospective R&D tax credit claims?

The deadline for submitting a retrospective claim for R&D tax credits is two years from the end of the accounting period in which the R&D work took place.

R&D tax credits are a form of Corporation Tax relief, so the time limit aligns with the 24 months that businesses have to amend their Corporation Tax returns.

Here’s a hypothetical example:

If your company had a year-end of 31st March each year and the date was 31st March 2022, you would have been able to submit retrospective R&D tax relief claims for research projects carried out within the following accounting periods:

  • 1st April 2019 – 31st March 2020
  • 1st April 2020 – 31st March 2021

From 1st April 2022, onwards, the last eligible accounting period that a claim could be submitted for would be:

  • 1st April 2020 – 31st March 2021

Going forward, you would be able to submit a claim each year, ensuring you never missed a claim.

What types of R&D expenditure can you claim for?

Businesses can claim R&D tax credits on certain types of operational spending, but not fixed assets like property.

Here’s a summary of the costs you can claim on, with some examples:

Staffing costs

  • Salaries and wages
  • Overtime pay and monetary bonuses
  • National Insurance contributions (Class 1)
  • Pension fund contributions
  • 65% of payments made to external agencies that provide staff specifically for the project

You can also claim for supporting staff who work directly on the project but not those whose work would’ve been completed anyway.

Subcontracted R&D work

Businesses on the SME scheme can claim 65% of the costs of using subcontracted workers for R&D activities.

RDEC applicants can only claim on subcontractors who are individuals, partnerships of individuals or any of the following:

  • Charity
  • Higher education institute
  • Scientific research body
  • Health service organisation

Consumables

Examples of consumables that could be part of your R&D claim include:

  • Chemicals, fuels and other substances (even if they’re recycled afterwards)
  • Materials parts used in prototypes (unless you sell the prototype)
  • A suitable proportion of energy and water costs

Software and other technology

The costs of any software used for R&D activities are eligible (both licencing and purchasing expenditure).

There are also new cost categories to cover data and cloud computing. The indirect uses of cloud computing, such as storage, are included too.

HMRC provides the relief in the form of corporate tax reduction or a direct cash payment, either of which can be used to fund business growth or finance further innovation projects.